Sat, Oct 01, 2016 page11

• Electric cars set to benefit as OPEC curbs oil output

  POLICY DRIVE: European governments offering generous subsidies for electric car purchases are advancing sales and pushing manufactures to showcase more models

  • Bloomberg
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  Electric car makers might breathe a sigh of relief from OPEC’s decision to curb oil output, which, if it holds, could help tilt the argument in favor of “greener” transport.

  Electric car sales stalled in the US last year, as gasoline prices fell 5.8 percent on average and demand for fuel rose for the first time in six years.

  Rising oil prices, or even signs that the cost of gasoline is unlikely to fall further, would help underpin the economic case for alternatives such as biofuels and electric cars, according to the International Energy Agency.

  

  A BMW X2 concept electric car, manufactured by Bayerische Motoren Werke AG, is displayed on Thursday during the first media day of the Paris Motor Show at the Paris Expo Porte de Versailles exhibition center in Paris, France.

  Photo: Bloomberg

  “At the margin, a higher oil price increases competitiveness of electric cars,” said Laszlo Varro, chief economist for the Paris-based energy watchdog for industrial nations. “Certainly in the US, there was a very interesting correlation that as gasoline prices declined there was a measurable shift in the US car market.”

  Oil prices jumped 5 percent after the OPEC on Wednesday agreed to cap supply, suggesting the two-year slide for crude prices could be over.

  While oil does not compete directly with renewables or electric cars, the price of each barrel seeps into every segment of the energy industry and helps determine whether policymakers and consumers are complacent or anxious about having options other than fossil fuels.

  Electric car sales are likely to surge 44 percent this year to a record 647,000 units, according to Bloomberg New Energy Finance. While that could displace a fraction of 1 percent of global oil demand, their growth along with biofuels, such as ethanol, mean that consumers have more alternatives to gasoline than before and can switch to a “greener” alternative more easily, said Michael Liebreich, founder of the London-based research group.

  A quarter of the world’s cars are likely to be an electric by 2040, Bloomberg New Energy Finance said.

  “If you think the oil price is going to go up to [US]$140 and sit there, then guess what, it’s not possible, because the substitution now would pick-up speed very rapidly because there are now scalable technologies that can do that,” Liebreich said.

  Outside the US, electric car sales are underpinned by generous subsidies from governments especially in Europe. Those policies are more likely to become resilient as oil prices rise.

  “There’s a very weak relationship between electric cars and the oil price outside the US,” Varro said.

  Electric car manufacturers such as Renault SA, whose Zoe model is now the best selling EV in Europe, are more sensitive to those government policies than to prices, since it is the subsidies that drive sales.

  They are showcasing more models in anticipation that the technology gains support from consumers.

  The oil price is “unpredictable, it’s uncontrollable,” said Carlos Ghosn, who runs both Renault and Nissan Motor Co, maker of the Leaf, the world’s second-best selling EV model.

  “What is predictable is that emissions constraints are going to become stricter and stricter,” Ghosn said in an interview on Bloomberg TV. “That’s why when we look at the mid and long term, we’re betting on electric cars.”
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